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ICT industry left out of stimulus package

by Staff Writers •
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The Federal Government’s Nation Building stimulus package offers little direct relief to the beleaguered ICT industry.

Intermedium’s analysis of the Government’s latest economic stimulus package indicates that despite the allocation of almost $42 billion in spending over the next four years, the impact on public sector investment and spending on ICT will be minimal at the Federal level, although there is scope for project-related ICT spending by the states.

This assessment becomes obvious in light of the structure of the package, which largely comprises transfers to the states for capital works projects, and personal benefits transfers to a wide range of recipients.

This will undoubtedly increase the tempo of activity within key Federal agencies such as the Tax Office and Centrelink.  As a consequence, some expenditure can be expected to enable these agencies to meet new benefits payment requirements and additional transaction volumes.  Given the structure and timing of the activity, it is reasonable to expect this incremental spending will largely be with incumbent suppliers under existing contracts, rather than leading to any major new spending associated with new approaches to the market.

However, there may be some additional ICT spending to support capital works projects delivered by state governments.  Intermedium estimates up to 5 per cent of new project values might be associated with ICT support.  The major candidate in this respect is the “Building the Education Revolution” initiative worth $14.7 billion, with the majority to be spent in the 2009-10 and 2010-11 financial years. Suppliers will need to monitor the approaches adopted by the states in spending this money but there is obviously clear scope to build in a modern ICT environment to complement the existing “PCs in schools” programs.  Indeed, it is vital this is done to maximise the ROI of both programs.

Beneficiary payments such as the Back To School bonus, Training And Learning bonus, tax bonus for Working Australians and Single Income Family bonus are aimed at stimulating consumer expenditure, and this may support consumer technologies generally.  However, we note the evidence in relation to the spending patterns associated with the October 2008 economic package is, at this stage, ambiguous.

Why is there not more for ICT?  This is a critical question, and there appears to be two explanations.  First, public sector ICT was, and still is, overheated through the ongoing effects of major refresh and development projects at agencies such as Tax, Customs, Immigration and Centrelink.  Secondly, expenditure benefiting the ICT sector results in higher levels of imports and payments offshore, with reduced benefit per dollar spent on maintaining employment in Australia.

If these are the reasons, Government needs to support them with data.  Intermedium’s analysis shows that while public sector ICT benefited from a high level of investment in recent years, this has rapidly dissipated, and we are currently in a period of public sector disinvestment.  With respect to the imports/offshore payments argument, there is equal if not stronger evidence the most significant component of ICT expenditure is in ICT services, much of which is supplied and supported onshore.  The Australian ICT industry needs to argue this more stridently.

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